chapter 12
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Chapter 12. Responsibility Accounting, Quality Control, and Environmental Cost Management. Responsibility Accounting. Responsibility accounting is used to measure the performance of people and departments to foster goal congruence. Responsibility Centers. - PowerPoint PPT PresentationTRANSCRIPT
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Chapter 12Chapter 12
Responsibility Accounting, Quality
Control, and Environmental Cost
Management
Responsibility Accounting, Quality
Control, and Environmental Cost
Management
12-2
Responsibility AccountingResponsibility AccountingResponsibility accounting is used to measure
the performance of people and departments to foster goal congruence.
Responsibility accounting is used to measure the performance of people and departments
to foster goal congruence.
12-3
Responsibility CentersResponsibility Centers
A subunit in an organization whose manager is held accountable for
specified financial results.
A subunit in an organization whose manager is held accountable for
specified financial results.
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Responsibility CentersResponsibility Centers
Cost Center Segment has
control over the incurrence
of costs.
Cost Center Segment has
control over the incurrence
of costs.
The Paint DepartmentThe Paint Departmentin an automobile plant.in an automobile plant.
Revenue Center Segment
is responsiblefor the revenue of
a unit.
Revenue Center Segment
is responsiblefor the revenue of
a unit.
The ReservationsThe ReservationsDepartment of an airline.Department of an airline.
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Responsibility CentersResponsibility Centers
Profit Center Segment has
control over both costs and
revenues.
Profit Center Segment has
control over both costs and
revenues.
Company-owned Company-owned restaurant in a fast-food restaurant in a fast-food
chain.chain.
Investment Center
Segment has control over profits
and invested capital.
Investment Center
Segment has control over profits
and invested capital.
A division of aA division of alarge corporation.large corporation.
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Performance ReportsPerformance ReportsFebruary Year to Date February Year to Date February Year to Date
Company . . . . . . . . . . . . . . . . . . . . . . $30,660 $64,567 $30,716 $64,570 $56 F $ 3 FMaui Division . . . . . . . . . . . . . . . . . . $18,400 $38,620 $18,470 $38,630 $70 F $10 FOahu Division . . . . . . . . . . . . . . . . . . 12,260 25,947 12,246 25,940 14 U 7 UTotal profit . . . . . . . . . . . . . . . . . . . . $30,660 $64,567 $30,716 $64,570 $56 F $ 3 FOahu DivisionWaimea Beach Resort . . . . . . . . . . . $6,050 $12,700 $6,060 $12,740 $10 F $40 FDiamond Head Lodge. . . . . . . . . . . 2,100 4,500 2,050 4,430 50 U 70 UWaikiki Sands Hotel . . . . . . . . . . . . . 4,110 8,747 4,136 8,770 26 F 23 FTotal profit . . . . . . . . . . . . . . . . . . . . $12,260 $25,947 $12,246 $25,940 $14 U $ 7 UWaikiki Sands HotelGrounds and Maintenance . . . . . . . . ($45) ($90) ($44) ($90) $ 1 F —Housekeeping and Custodial . . . . . . (40) (90) (41) (90) 1 U —Recreational Services . . . . . . . . . . . . 40 85 41 88 1 F $ 3 F Hospitality . . . . . . . . . . . . . . . . . . . . 2,800 6,000 2,840 6,030 40 F 30 F Food and Beverage . . . . . . . . . . . . . 1,355 2,842 1,340 2,832 15 F 10 U Total profit . . . . . . . . . . . . . . . . . . . . $4,110 $8,747 $4,136 $8,770 $26 F $23 F Food and Beverage DepartmentBanquets and Catering . . . . . . . . . . . $600 $1,260 $605 $1,265 $ 5 F $ 5 F Restaurants . . . . . . . . . . . . . . . . . . . 1,785 3,750 1,760 3,740 25 U 10 U Kitchen. . . . . . . . . . . . . . . . . . . . . . . (1,030) (2,168) (1,025) (2,173) 5 F 5 U Total profit . . . . . . . . . . . . . . . . . . . . $1,355 $2,842 $1,340 $2,832 $15 U $10 U KitchenKitchen staff wages . . . . . . . . . . . . . ($80) ($168) ($78) ($169) $ 2 F $ 1 U Food . . . . . . . . . . . . . . . . . . . . . . . . (675) (1,420) (678) (1,421) 3 U 1 U Paper products. . . . . . . . . . . . . . . . . (120) (250) (115) (248) 5 F 2 F Variable overhead. . . . . . . . . . . . . . . (70) (150) (71) (154) 1 U 4 U Fixed overhead. . . . . . . . . . . . . . . . . (85) (180) (83) (181) 2 F 1 U Total expense . . . . . . . . . . . . . . . . . . ($1,030) ($2,168) ($1,025) ($2,173) $ 5 F $ 5 U
*Numbers w ithout parentheses denote profit; numbers w ith parentheses denote ex penses; numbers in thousands.
†F denotes fav orable v ariance; U denotes unfav orable v ariance.
Flexible Budget* Actual Results* Variance†
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Cost AllocationCost Allocation
The process of assigning the costs in the cost pool to the cost objects is called cost allocation or cost distribution.
12-8
Cost Allocation BasesCost Allocation Bases
An allocation base is a measure of activity,
physical characteristic, or
economic characteristic that is associated with the
responsibility centers, which are the cost
objects in the allocation process.
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Behavioral Effects of Behavioral Effects of Responsibility AccountingResponsibility Accounting
InformationversusBlame
Controllability
MotivatingDesiredBehavior
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Segmented ReportingSegmented Reporting
Segmented reporting refers to the preparation of accounting
reports by segment and for the organization as a whole.
A segment is any part or activity of an organization
about which a manager seeks cost, revenue, or profit data.
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Segmented ReportingSegmented Reporting
DivisionsDivisions•
Units•
Aloha Hotels and Resorts
Aloha Hotels and Resorts
Oahu DivisionOahu DivisionMaui DivisionMaui Division
Waikiki Sands Hotel
Waikiki Sands Hotel
Diamond Head Lodge
Diamond Head Lodge
Waimea Beach Resort
Waimea Beach Resort
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Segmented ReportingSegmented Reporting
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Key Features of Segmented Key Features of Segmented ReportingReporting
�Contribution format.�Controllable versus uncontrollable expenses.�Segmented income statement.
�Contribution format.�Controllable versus uncontrollable expenses.�Segmented income statement.
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Cost of QualityCost of Quality
Quality costs include the follows:– Prevention costs,– Appraisal costs,– Internal failure costs, and– External failure costs.
Quality costs include the follows:– Prevention costs,– Appraisal costs,– Internal failure costs, and– External failure costs.
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Cost of QualityCost of Quality
The opportunity cost of lost sales and decreased
market share can represent a
significant hidden cost.